The Foreclosure Problems

The Foreclosure Problems - The No. 1 reason people fall behind on their mortgage is loss of a job, or some source of income, perhaps from a divorce or death of a spouse. If a borrower is unemployed, lenders don't have many options but foreclosure.

In 2006, 36% of mortgage delinquencies were caused by loss of income or unemployment, according to research by mortgage finance company Freddie Mac. But that number has risen to 45% this year as the unemployment rate has ticked up to a five-year high of 6.1%.

Roughly 1/3 of all subprime loans modified in the third quarter of last year were delinquent again within 10 months, according to a Credit Suisse report released this month.

The scale of the mortgage crisis became clear in July 2007 when Countrywide Financial, then the nation's largest mortgage lender, reported an unexpected surge in defaults in high-quality mortgages.

Three months later, the Bush administration announced a new mortgage industry coalition dubbed the Hope Now alliance. The coalition had an "aggressive plan to reach more homeowners and help them find a way to stay in their homes," Treasury Secretary Henry Paulson said at the time.

The Hope Now group says the industry has modified 765,000 loans since last July, and put 1.5 million borrowers on temporary repayment plans. There are no data on how many of those homeowners have fallen behind again.